Many landowners expect to obtain a federal charitable tax deduction as part of their gifts of money or property to land trusts. However, there are rules that landowners must follow to prove that they properly made the gift and deserve a tax deduction for it. The IRS has fully denied deductions because of improperly completed forms, the absence of required documentation, or the failure of an appraisal to comply with all the rules in the Tax Code and the Treasury Regulations. Standards and practices that apply specifically to gift substantiation and appraisals will be discussed along with the legal requirements.
Correctly completing Form 8283 can make or break a conservation easement deduction and the IRS issued a new version of this form in Dec. 2020. The IRS has fully denied deductions because of improperly completed forms or the lack of required documentation. A contemporaneous written acknowledgement is required to be received by the donor for the donation to be deductible. Knowing what transaction expenses are deductible is also critical, as many are unaware that reimbursing a landowner for such expenses could render the donation a "bargain sale." While donors are legally responsible for substantiating donations, land trusts may assist donors to understand the forms, so long as they don't provide legal advice. The session will also discuss how a donee organization should review a donor's appraisal, what to do if the claimed value is so high as to "shock the conscience," and recent changes to Land Trust Standards and Practices and recent court cases related to Form 8283 and gift letters. This is an abbreviated version of the seminar offered by the presenters and appraiser Mark Weston on Thursday. That session will include hands-on exercises and more detail on federal tax and qualified appraisals; there is no need to attend this session if you attend the seminar.